Econ Midterm
Examining the conditions that could lead to unemployment in an economy is an example of microeconomics topic.
False
If a country is producing efficiently and is on the production possibilities frontier, the country can produce more of one good without producing less of the other good.
False
If marginal benefit is greater than marginal cost, output is inefficiently high.
False
Marginal benefit is the total benefit to a consumer from consuming one more unit of a good
False
Economists refer a to a market where buying and selling take place at prices that violate government price regulations as a restricted market black market an outlaw market a noncompetitive marke
black market
Suppose your expenses for this term are as follows: tuition: $12,000, room and board: $6,500, books and other educational supplies: $1,500. Further, during the term, you can only work part-time and earn $3,500 instead of your full-time salary of $14,000. What is the opportunity cost of going to college this term, assuming that your room and board expenses would be the same even if you did not go to college? 24,000 13,500 30,500 20,000
24,000
Bella can produce either a combination of 60 silk roses and 80 silk leaves or a combination of 70 silk roses and 55 silk leaves. If she now produces 60 silk roses and 80 silk leaves, what is the opportunity cost of producing an additional 10 silk roses? 2.5 silk leaves 55 silk leaves 10 silk leaves 25 silk leaves
25 silk leaves
If a consumer receives 22 units of marginal utility for consuming the first can of soda, 20 units from consuming the second, and 15 from the third, the total utility of consuming the three units is 15 utility units 35 utility units 57 utility units
57 utility units
Which of the following statements is false? A straight line has a slope of zero. A direct relationship has a positive slope value. An inverse relationship has a negative slope value. A curved line has slope values that change at every point.
A straight line has a slope of zero.
A market failure arises when an entire sector of the economy (for example, the airline industry) collapses because of some unforeseen event.
False
A network externality refers to a situation in which the usefulness of a product decreases with the number of consumers who use it.
False
If the absolute value of the price elasticity of demand for gasoline is 0.5, then a 10 percent increase in the price of gasoline leads to a 0.5 percent decrease in the quantity demanded.
False
If the demand for a product is elastic, the quantity demanded changes by a smaller percentage than the percentage change in price.
False
Market equilibrium occurs where supply equals demand.
False
Suppose at a price of $50, Yoshi's Jazz Bar sells 20 tickets to its nightly jazz performance and at a price of $40, it sells 25 tickets. Based on this information, the demand for Yoshi's jazz performance is elastic.
False
Suppose that to increase sales of hybrid vehicles, auto manufacturers are offering large cash incentives. This is an example of a macroeconomics topic.
False
The economic model of consumer behavior explains how consumers' tastes and preferences are formed.
False
The total amount of producer surplus in a market is equal to the area below the supply curve.
False
When a business is set up as a sole proprietorship, the owner of the business faces limited liability.
False
When diminishing marginal utility sets in, total utility must be negative
False
When there is a positive externality in a free market, too much of the good is produced and consumed.
False
What is the "omitted variable" problem in determining cause and effect? It is a problem that arises when an economic variable that affects other variables is omitted from an analysis and its omission leads to false conclusions about cause and effect. It is a problem that arises when an insignificant economic variable that should have been omitted is included in an economic experiment leading to false conclusions about cause and effect. It is a problem that arises when a significant variable is not given enough weight in an economic experiment leading to skewed conclusions about cause and effect. It is a problem that arises when an insignificant variable is given too much weight in an economic analysis leading to skewed conclusions about cause and effect.
It is a problem that arises when an economic variable that affects other variables is omitted from an analysis and its omission leads to false conclusions about cause and effect.
Suppose there is no unemployment in the economy and society decides that it wants more of one good. Which of the following statements is true? It can increase output without giving up another good. It can only achieve this with an advance in technology. It can only achieve this with an increase in resource supplies. It will have to give up production and consumption of some other good.
It will have to give up production and consumption of some other good.
In an experiment that employed the dictator game, economists at Cornell University gave student "allocators" the option of dividing $20 in only two ways (a) $18 for themselves and $2 to another student, or (b) $10 for themselves and $10 to another student. What was one result from this experiment? Most of the allocators apparently valued acting fairly. Most of the students who were not allocators did not like having someone else make decisions for them. Most allocators chose to give themselves $18 and $2 to the other students. A majority of the female allocators chose option (a); a majority of the male allocators chose option (b).
Most of the allocators apparently valued acting fairly.
________ is a problem that occurs when one concludes that a change in variable X caused a change in variable Y when in actual fact, it is a change in variable Y that caused a change in variable X. Reverse causality The omitted variable The positive-to-negative relationship Nonlinear slope
Reverse causality
A network externality causes firms to sacrifice profits in the short run in order to satisfy their customers and increase their long-run profits.
True
A shortage occurs when the market price is lower than the equilibrium price.
True
A surplus occurs when the actual selling price is above the market equilibrium price.
True
An external benefit is created when you pursue a college education.
True
An externality is an example of a market failure.
True
An inferior good is a good for which the quantity demanded decreases as the price increases, holding everything else constant.
True
Chips and salsa are complements. If the price of salsa decreases, the demand for chips will increase.
True
Economists have shown that when the ultimatum game experiment is carried out, both allocators and recipients act as if fairness is important.
True
Examining the conditions that could lead to a recession in an economy is an example of macroeconomics topic.
True
If at a price of $10, a vendor sells 5 units of a product and at a price of $8, 6 units are sold, then, using the midpoint formula, the demand for this good is inelastic.
True
If consumers believe the price of iPads will decrease in the future, this will cause the demand for iPads to decrease now.
True
If demand is inelastic, the absolute value of the price elasticity coefficient is greater than one.
True
If the demand for a product is elastic, the quantity demanded changes by a larger percentage than the percentage change in price.
True
If you received negative marginal utility from consuming the 4th slice of pizza, then your total utility from 4 slices of pizza must be less than your total utility from 3 slices of pizza.
True
In response to a surplus the market price of a good will fall; as the price falls, the quantity demanded will increase and quantity supplies will decrease until equilibrium is reached.
True
In the United States, corporate profits are taxed at the corporate level and then are taxed again as personal income in the form of dividend payments.
True
Marginal cost is the additional cost to a firm of producing one more unit of a good or service.
True
One example of human capital is the amount of skills that you have.
True
Producer surplus is the difference between the lowest price a firm is willing to accept for a product and the price it actually receives for the product.
True
Results of the ultimatum game indicate that most people value fairness enough that they will refuse to participate in a transaction they consider unfair, even if they are worse off financially as a result
True
The decisions Apple makes in determining production levels for its iPhone is an example of a microeconomics topic.
True
The income effect of a price change refers to the change in the quantity demanded of a good that results from a change in purchasing power as a result of the price change.
True
The income effect of a price increase causes a decrease in the quantity demanded of a normal good.
True
The private cost of a good or service is the cost borne by the producer.
True
The sum of consumer surplus and producer surplus is called economic surplus.
True
To increase gas mileage, automobile manufacturers make cars small and light. Large cars absorb more of the impact of an accident than small cars but yield lower gas mileage. These facts suggest that a negative relationship exists between safety and gas mileage.
True
When a business is set up as partnership, the owner of the business faces unlimited liability.
True
When negative externalities exist, the competitive market supply curve does not include all of the costs borne by members of society.
True
When products that create positive externalities are produced, at the market equilibrium output, the social benefit generated by consuming the product exceeds the private benefit.
True
The relationship between consumer spending and disposable personal income is a direct relationship. an inverse relationship. a negative relationship independent
a direct relationship.
Increasing opportunity cost is represented by a ________ production possibilities frontier. vertical linear bowed out bowed in
bowed out
The production possibilities frontier model shows that if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good. economic growth can only be achieved by free market economies. a market economy is more efficient in producing goods and services than is a centrally planned economy. if consumers decide to buy more of a product its price will increase.
if all resources are fully and efficiently utilized, more of one good can be produced only by producing less of another good.
According to census figures and the Congressional Budget Office, the number of people aged 65 and older is projected to ________ and the number of uninsured people is projected to ________ by the year 2020. decrease; increase increase; increase decrease; decrease increase; decrease
increase; decrease
If the production possibilities frontier is ________, then opportunity costs are constant as more of one good is produced. bowed in non-linear linear Bowed out
linear
All of the following is counted as "capital" in economics except warehouses. factory buildings. machine tools. money.
money.
Many people leave their servers tips in restaurants, even when they are not likely to visit the restaurant again. This is evidence that there has been an improvement in the service people receive in restaurants over time, partly because the restaurant industry has become more competitive. people enjoy eating at restaurants more than eating at home. people would rather pay for good service at an inexpensive restaurant than pay higher prices and receive poor service at an expensive restaurant. people treat others fairly even if doing so makes them worse off financially.
people treat others fairly even if doing so makes them worse off financially.
The machines workers have to work with are considered entrepreneurship. financial capital. physical capital. human capital.
physical capital. .
Marginal utility can be positive, negative or zero. negative zero positive
positive, negative or zero.
Rent control is an example of black market a subsidy for low-skilled workers price floor price ceiling
price ceiling
In economics, choices must be made because we live in a world of unemployment. scarcity greed unlimited resources
scarcity
The basic economic problem of ________ has always existed and will continue to exist. inflation scarcity efficiency recession
scarcity
Scarcity stems from the incompatibility between limited resources and unlimited wants. can be overcome by discovering new resources. can be eliminated by rationing products. is a bigger problem in market economies than in socialist economies.
stems from the incompatibility between limited resources and unlimited wants.
Households ________ factors of production and ________ goods and services. demand; supply demand; demand supply; supply supply; demand
supply; demand
The principle of opportunity cost is that the cost of production varies depending on the opportunity for technological application. in a market economy, taking advantage of profitable opportunities involves some money cost taking advantage of investment opportunities involves costs. the economic cost of using a factor of production is the alternative use of that factor that is given up.
the economic cost of using a factor of production is the alternative use of that factor that is given up.
A good is path dependent when it can only be used in one way. people who move location follow the path of people who moved before them. the first technology that was adopted has an advantage over a better technology that came later. consumers get utility from consuming goods that others are consuming, such as restaurants
the first technology that was adopted has an advantage over a better technology that came later.
If, as a person consumes more and more of a good, each additional unit adds less satisfaction than the previous unit consumed, we are seeing the workings of the law of demand. the law of diminishing marginal utility. the law of supply. the law of increasing marginal opportunity cost.
the law of diminishing marginal utility.
A corporation is the type of business has ________ government rules and regulations affecting it. the fewest the most
the most
If the demand for iPods is price elastic, then the percentage change in quantity demanded is greater than the percentage change in price (in absolute value). the percentage change in quantity demanded is less than the percentage change in price (in absolute value). the percentage change in quantity demanded is equal to the percentage change in price
the percentage change in quantity demanded is greater than the percentage change in price (in absolute value).
Suppose when the price of laptops fall, college students buy more laptops. This implies that there is a direct relationship between laptop prices and quantities purchased by college students. there is a one-to-one relationship between laptop prices and quantities purchased by college students. there is a positive relationship between laptop prices and quantities purchased by college students there is a negative relationship between laptop prices and quantities purchased by college students
there is a negative relationship between laptop prices and quantities purchased by college students
Government intervention in agricultural markets in the U.S. began in the 1950's 1920's 1930's 1970's
1930's
A consumer maximizes her total utility from a bundle of goods when her marginal utility from each good is equal.
False
A decrease in the unemployment rate may be represented as a movement from a point on the production possibilities frontier to a point outside the frontier.
False
An externality refers to economic events outside a market.
False
If the market price is at equilibrium, the deadweight loss is maximized.
False
If the market price is at equilibrium, the producer surplus is minimized.
False
If the price of peaches, a substitute for plums, decreases the demand for plums will increase.
False
If, when price changes by 35 percent, the quantity demanded changes by 7 percent, then the absolute value of the price elasticity of demand is 5.
False
In the United States, partnership profits are taxed at the business level and then are taxed again as personal income in the form of dividend payments.
False
The only type of business that faces unlimited liability is a sole proprietorship.
False
The social cost of a good or service is the cost borne by the producer.
False
The substitution effect of a change in the price of cauliflower is the portion of the change in the quantity of cauliflower demanded that can be attributed to the change in the price of a substitute vegetable such as asparagus.
False
The total amount of consumer surplus in a market is equal to the area below the demand curve.
False
The only type of business that faces limited liability is a corporation.
True
As a form of business, a partnership has limited liability has only one owner has the most government rules and regulations affecting it. cannot issue stock
cannot issue stock
All of the following products are most likely to have significant network externalities except cat food fax machines cell phones popular board games
cat food
Assume you set up a sole proprietorship and your lawyer tells you that as the owner, you could stand to lose your personal wealth if the business goes bankrupt. This means a sole proprietorship faces limited liability. is not a good type of business to set up. has little chance of succeeding. faces unlimited liability.
faces unlimited liability.
Once a product becomes established, network externalities may create ________ costs that make consumers reluctant to buy a new product with better technology. switching external marginal implicit
switching
All but one of the following economists were awarded a Nobel prize for their contributions to experimental economics and their explorations of the influence fairness has on consumer decision-making. Which economist did not receive a Nobel Prize for this work? Alan Krueger Maurice Allais Vernon Smith Daniel Kahneman
Alan Krueger
Consider a country that produces only two goods: parrots and iguanas. Suppose it is impossible for this country to increase its production of parrots without producing fewer iguanas. In this case, its current output combination is efficient.
True
Consumer surplus is the difference between the highest price someone is willing to pay for a product and the price he actually pays for the product.
True
Deadweight loss refers to the reduction in economic surplus resulting from a market not being in competitive equilibrium.
True
If you exhibit the endowment effect as a decision maker, then you are consuming based on celebrity endorsements. deciding on the basis of sunk costs. ignoring non-monetary opportunity costs. consuming based on celebrity endorsements.
ignoring non-monetary opportunity costs.
A partnership is ________ type of business. the least common the least risky the most profitable the most common
the least common
Without an increase in the supplies of factors of production, how can a nation achieve economic growth? through technological advancement which enables are output with the same quantity of resources. by producing more high-value goods and less of low-value goods. by increasing the prices of factors of production by lowering the prices of factors of production
through technological advancement which enables are output with the same quantity of resources.
The midpoint formula is used to measure the elasticity of demand between two points on a demand curve to ensure that the elasticity has a negative value to ensure that we have only one value of the price elasticity of demand between two points on a demand curve. when demand is elastic in special cases when the percentage change in the quantity demanded is equal to the percentage change in price
to ensure that we have only one value of the price elasticity of demand between two points on a demand curve.
The points outside the production possibilities frontier are inefficient efficient unattainable attainable
unattainable